Originally posted on Tuesday, November 19th, 2013
“I’ve softened in my view towards the gold standard.” — Jerry Bowyer
Public intellectual and Forbes.com columnist Jerry Bowyer recently published a fascinating interview with Allan Meltzer, entitled My Friendly Debate On the Gold Standard With Allan Meltzer, The World’s Leading Monetarist.
Prof. Allan Meltzer
courtesy of Carnegie Mellon Tepper School of Business
Among the more interesting observations must be counted Bowyer’s own comment:
I’ve softened in my view towards the gold standard. It used to be that most of the writing that I did about the gold standard was negative. I’m beginning to wonder if one could ever really have the moral force in the political arena around an equation like the Taylor Rule, which is an admirable equation, that one could have over something that’s got basically over 4000 years of recorded history behind it, which is a reliance on gold. I’ve come to see the gold standard as maybe the only real hope we’d have of getting some kind of price stability, given the fact that it’s so easy to manipulate theories and to manipulate equations, but it’s not easy to manipulate the supply of gold.
Prof. Meltzer states:
You’re never going to see the gold standard. The only way the gold standard would work would be as a multinational standard — There isn’t the slightest chance in the world that you’ll get the Europeans, the Japanese, and the Chinese to agree to a gold standard.
To which Bowyer replies:
Well, it depends on what their paper currencies do and how sick their own populations eventually get of the decline of paper currencies. But I’ve heard you make this argument before, and it seems to me that there’s something different about the notion that you’ll never get it and the notion that it’s wrong.
Prof. Meltzer responds:
I don’t say it’s wrong. I say it’s possible. I mean, it’s a plausible system. … There are a lot of things that are better than our fiat system. I’m hardly the person to defend what we’re doing, certainly not what we’re doing at the present time.
It is noteworthy when “the world’s leading monetarist” — without imputing to him a preference for the gold standard — admits that the gold standard is neither wrong nor implausible. It is further evidence, were any needed, that the classical gold standard is fully recovered as a respectable — and, as in the case of Bowyer, respected — policy proposition.
And kudos to Jerry Bowyer for bringing the sentiments of the great college president, and one of the founders of America, John Witherspoon into the contemporary debate.
This blogger has referenced Witherspoon’s writings here, previously:
“How absurd and contemptible then is the reasoning which we of late have seen frequently in print, viz, the gold and silver is going away from us, therefore we must have paper to supply its place. If the gold and silver is indeed going away from us, that is to say, if the balance of trade is much against us, the paper medium has a direct tendency to increase the evil, and send it away by a quicker pace.”
Concluding: “How absurd and contemptible would Witherspoon have found it that the greatest contemporary apologist for paper money, Prof. Paul Krugman, is a Princeton professor, and the greatest generator of fiduciary currency, Federal Reserve chairman Ben Bernanke, preceded his federal service in an academic career at Princeton?
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